New Air Force Tanker May Avoid Budget Ax

NATIONAL HARBOR, Md. – The U.S. Air Force's new refueling tanker made by Boeing Co. may dodge automatic budget cuts known as sequestration next year, according to the general who oversees the program.

The Air Force plans to spend $52 billion buying 179 KC-46A aircraft, a derivative of the 767 twin-engine jet airliner, to replace a third of its fleet of Cold War-era KC-135 Stratotankers, also made by Boeing.

The program is the service's top acquisition priority and has the support of the service's top civilian, Acting Secretary Eric Fanning; top officer, Chief of Staff Gen. Mark Welsh, and other leaders, according to Maj. Gen. John Thompson, who manages tanker programs from Wright-Patterson Air Force Base, Ohio.

"There's considerable amount of uncertainty relative to sequestration," Thompson told a crowd at the second day of the Air Force Association's Air & Space Conference and Exhibition here. "As the Number One modernization program, though, I'm sure that the secretary and the chief and the rest of the Air Force leadership will do what they can to protect this very critical program."

The Defense Department faces $500 billion in automatic cuts over the next decade. That's in addition to almost $500 billion in defense reductions already included in 2011 deficit-reduction legislation. The first installment of the automatic cuts began March 1 after lawmakers were unable to reach an alternative agreement on taxes and spending. The next round takes effect in fiscal year 2014, which begins Oct. 1, and is estimated at $52 billion.

The program office was able to verify the new tanker's engineering specifications as part of an acquisition milestone known as critical design review on Aug. 21 -- a month ahead of schedule -- in part because officials at the Pentagon and lawmakers on Capitol Hill "took care of us," Thompson said. "I had the dollars to make my contract work and to get through critical design review."

The office, which employs about 160 people, was affected by the Pentagon's decision earlier this year to force some 650,000 civilian employees to take six days of mandatory unpaid leaves of absences, known as furloughs, Thompson said. But other agencies within the service dispatched an additional 30 or so engineers and technical staff to help offset the workforce losses, he said.

Funding for existing tanker programs, including the KC-135 and KC-10 fleets, wasn't as fortunate, Thompson said. He declined to confirm a news report that the service is considering getting rid of its fleets of A-10 attack planes, KC-10 refueling tankers and F-15C fighter jets, as well as canceling a new search-and-rescue helicopter program, due to the across-the-board budget reductions.

The service has said two aircraft in production at Boeing's plant in Everett, Wash. One will be ready for flight testing in mid-2014. The first fully equipped plane -- outfitted with such mission equipment as a refueling operating station, boom refueling systems and defensive weapons -- is scheduled to fly in early 2015. Boeing is under contract to deliver 18 of the aircraft by August 2017 and the remainder by 2027.

The plane will be able to refuel two aircraft such as F/A-18 fighter jets at a time, using a pair of refueling pods on the wing tips, Thompson said. It features a boom and centerline drogue for conventional refueling operations.

Unlike existing tankers, the aircraft will be outfitted with ballistic armor to protect the pilots and crew from gunfire, Thompson said. Its electrical components will also be made to withstand the electromagnetic pulse from a nuclear blast, he said.

The plane will not have the same battery system as the 787 Dreamliner, Thompson said, drawing chuckles from the audience. He was referring to the lithium-ion power system that caught fire earlier this year and caused a three-month grounding of Boeing's new commercial airliner.

The cost and schedule of the new tanker program are "on track," Thompson said. The Air Force requested $1.56 billion for the program in fiscal 2014, which begins Oct. 1, a decrease of 14 percent from the previous year, according to Pentagon budget documents.

Government auditors found the cost of developing the first four planes will exceed the contract ceiling price of $4.9 billion, according to a Government Accountability Office report from earlier this year. They also determined that Boeing already used the vast majority of a reserve budget for development risks, even though five years' worth of work remains.

When asked about the findings, Thompson said the title of the report described the program as "generally stable."

"Although 'generally stable' is not something you would tell your spouse in terms of the status of your marriage, 'generally stable' is I think a very positive way to refer to an acquisition program," he quipped.

The terms of the so-called fixed-price contract stipulate that Boeing will cover development costs in excess of $4.83 billion, Thompson said. The government currently estimates the development phase will cost $5.6 billion, while the company forecasts it will cost $5.1 billion, he said.

The company also restored some $70 million to the reserve budget for development risk, which "is not nearly the concern it was" a year ago, Thompson said.

The general is scheduled to discuss the program with the Senate Armed Services Committee later this week. He will do the same with the other congressional defense committees next week.